Morgan Stanley's Wealth Building Techniques: There are 5 Tips Here for Beginners
Financial freedom is not only a luxury, it is a goal that many people want to achieve. Even though personal finance can be a complex subject, there are some strategies that can help new people to navigate through the financial world. Morgan Stanley, one of the biggest financial services providers in the world has provided some techniques which have helped many people to achieve their financial goals. So, in this article, we will discuss five essential tips for beginners as suggested by Morgan Stanley and its experts.
1. First, let’s create a Financial Plan
Before you embark on your journey to financial freedom, you need to have a financial plan in place. You should regard your financial plan as a map that defines your future financial goals and the ways how to achieve them. Morgan Stanley also points out the importance of goal setting in the financial sphere and the types of goals that people make in the financial sphere including saving for retirement, buying a house, or paying for children’s college tuition.
As you develop your financial plan, you should consider the following:
- Determine your short-term and long-term financial goals.
- Know your current financial status, that is, your income, expenditure, and debts.
- Create a budget to help you monitor your expenditure and ensure that you are saving enough.
- Set up a separate account for emergencies in case of any other expenditure.
This way, you will be in a better position to make the right financial decisions since you will have a financial plan to follow. It also helps to know what your cash flow is.
2. It is always good to diversify your investments.
Morgan Stanley also emphasizes the importance of not putting all your eggs in one basket when it comes to investing. Diversification is the process of investing across different asset classes, industries and geographic regions in order to minimize risk and maximize return.
For instance, instead of investing all the money in one stock, one can consider diversifying the investment portfolio across stocks, bonds, real estate and other assets. This way, you avoid the situation where the performance of a single investment affects the performance of the whole portfolio.
However, it is still possible to diversify within each asset class, and this is something that you should consider doing. For instance, if you are more orientated towards stocks then you should try and invest in different companies across different sectors to avoid concentration risk.
3. It is important to take advantage of the following Tax Efficient Strategies
This is an important factor in wealth creation and Morgan Stanley advises on how to reduce taxes to realize more returns on investment.
One way to do this is to invest in tax advantaged accounts such as an IRA or a 401(k) where the contribution may be tax deductible. Also, the compensation is taxed only at the time of withdrawal hence your investments will keep on growing without being taxed.
Another good practice is the tax loss harvesting, which is the process of selling loss making investments so as to offset gains. This can prevent you from paying a certain amount of tax. It is always important to include the tax factor when managing your investments as this will help you get a better after tax return.
4. Stay Informed and Seek Professional Advice
The financial world is never static and this has implications for successful wealth creation. Morgan Stanley also focuses on the need to know the market trends, economic indicators and investment avenues.
It is important to educate yourself as much as possible, but it is important to seek the counsel of a financial advisor who can provide invaluable insights and guidance. These professionals can assist you in making difficult decisions, design specific investment plans, and provide advice that is specific to your situation.
When choosing a financial advisor, the qualifications and experience of the advisor should be checked and the advisors who are fiduciaries should be chosen. These are lawyers who are bound by law to work only for your benefit.
5. This is a Long-Term Process
Wealth creation is not something that happens overnight; it is more of a process. It is important not to panic and make decisions that are based on the short-term performance of the market.
According to Morgan Stanley, investors should not be bothered by the market fluctuations and should concentrate on the long-term goals and stick to the investment plan. History also tells us that the markets tend to correct and investors who remain invested stand to make decent returns in the long run.
